PolarityTE Reports Third Quarter 2022 Financial Results and Provides Business Update

November 11, 2022

SALT LAKE CITY, Nov. 10, 2022 /PRNewswire/ — PolarityTE, Inc. (Nasdaq: PTE) a biotechnology company developing regenerative tissue products and biomaterials, today provided a business update and reported financial results for the quarterly period ended September 30, 2022.

• At the end of April 2022, PolarityTE began enrollment in its Phase III randomized controlled trial (RCT), which is a pivotal study under its open IND for SkinTE^®. The Company estimates that it may be able to complete enrollment of 100 subjects sometime in the first six months of 2024. Additionally, there is an interim analysis planned for the first 50 patients and we believe that data will be available in the fourth calendar quarter of 2023.
• In May 2022, the U.S Food and Drug Administration (FDA) granted PolarityTE’s request for SkinTE to be designated as a Regenerative Medicine Advanced Therapy (RMAT). As a result of the RMAT designation the Company was able to engage in an expedited dialogue with the FDA on the tasks that are likely to be necessary to support a Biologics License Application (BLA) for SkinTE. Based on that dialogue the Company plans to run a second multi-center RCT under its current IND to support approval of a broad diabetic foot ulcer (DFU) indication for SkinTE, and the Company will be communicating with the FDA regarding the design and implementation of the second clinical trial.
• The Company had cash and cash equivalents of $16.1 million and working capital of $15.7 million at September 30, 2022.
• For the three-month period ended September 30, 2022, cash used in operating activities was $4.0 million, or an average of $1.3 million per month, compared to $4.6 million of cash used in operating activities, or an average of $1.5 million per month, for the three-month period ended September 30, 2021.

Richard Hague, President and CEO of PolarityTE, commented, “We remain firmly focused on enrolling our Phase III pivotal study in Wagner 2 DFUs for SkinTE, which we believe represents both a significant unmet medical need and a substantial market opportunity. We are very pleased that FDA granted SkinTE a Regenerative Medicine Advanced Therapy (RMAT) for DFUs and VLUs.  The RMAT designation is reserved for products that FDA believes has the potential to treat, modify, reverse or cure a serious or life threatening condition. As we work to generate the data necessary for an eventual BLA submission,  we will continue to exercise financial discipline and look to reduce operating expenses wherever possible.”

There have been significant changes in the Company’s operations affecting its results of operations for the nine-month period ended September 30, 2022, compared to the nine-month period ended September 30, 2021.

On July 23, 2021, the Company submitted an IND for SkinTE to the FDA through its subsidiary as the first step in the regulatory process for obtaining licensure for SkinTE under Section 351 of the Public Health Service Act.  The FDA subsequently issued clinical hold correspondence to the Company identifying certain issues that needed to be addressed before the IND could be approved.  The Company provided responses to the FDA, and on January 14, 2022, the FDA sent correspondence informing the Company that the clinical hold had been removed.  Acceptance of the IND by the FDA enables the Company to commence the first of two expected pivotal studies needed to support a BLA for SkinTE.  The Company ceased selling SkinTE at the end of May 2021, when the period of enforcement discretion previously announced by the FDA with respect to its IND and premarket approval requirements for regenerative medicine therapies, such as SkinTE, came to an end, and the Company does not expect to be able to commercialize SkinTE until its BLA is approved, which the Company believes will take at least three to four years.  Consequently, the Company recognized products net revenues in the nine months of 2021, and did not have any such revenues in the first nine months of 2022.

The Company’s subsidiary, Arches Research, Inc. (“Arches”) began offering COVID-19 testing services in May 2020 under 30-day renewable testing agreements with multiple nursing home and pharmacy facilities in the state of New York controlled by a single company, which substantially added to the Company’s services net revenues in the first three months of 2021.  When the New York nursing homes and pharmacies adopted on-site employee testing at the end of March 2021, the Company’s COVID-19 testing revenues declined substantially, and in August 2021, the Company decided to cease COVID-19 testing.  Arches focused its research and development resources on supporting the Company’s IND and clinical trial efforts for the remainder of 2021 and continued in that role in 2022.  However, the Company does not expect it will have the same need for research and development staff associated with product development and, as a result, the Company reduced research and development staff in April 2022, and began to eliminate or sell certain items of equipment that had been leased or purchased for research and development activity.

At the beginning of May 2018, the Company acquired a preclinical research and veterinary sciences business, which the Company operated through its indirect subsidiary, IBEX Preclinical Research, Inc. (“IBEX”).  Utah CRO Services, Inc., a Nevada corporation (“Utah CRO”), is the Company’s direct subsidiary and held all the outstanding capital stock of IBEX (the “IBEX Shares”).  Utah CRO also held all the member interest of IBEX Property LLC, a Nevada limited liability company (“IBEX Property”), that owned two unencumbered parcels of real property in Logan, Utah, consisting of approximately 1.75 combined gross acres of land, together with the buildings, structures, fixtures, and personal property (the “Property”), which was leased by IBEX Property to IBEX for IBEX to conduct its preclinical research and veterinary sciences business.  On April 28, 2022, Utah CRO sold all the IBEX Shares to an unrelated third party in exchange for a promissory note in the principal amount of $0.4 million bearing simple interest at the rate of 10% per annum payable interest only on a quarterly basis and all principal and remaining accrued interest due on the five-year anniversary of the closing of the sale of the IBEX Shares.  On the same day IBEX Property closed the sale of the Property to an affiliate of the same party that purchased the IBEX Shares and the Company realized net cash proceeds of $2.3 million, after deducting closing costs and advisory fees.  Prior to April 2022, while the Company was exploring the opportunities for selling IBEX and the IBEX Property, IBEX assumed a more passive approach to marketing its services, which resulted in a decline in IBEX services revenues in the first nine months of 2022 compared to the first nine months of 2021.  Accordingly, the Company’s services net revenues were nominal from the beginning of 2022 through the sale of IBEX and the IBEX Property completed at the end of April 2022, and services net revenues generated by IBEX ended permanently after the sale.

As a result of the foregoing developments, the Company made a number of changes to its operations that impacted its results of operations.  These included reductions in the Company’s work force and reducing the services and infrastructure needed to support a larger work force and commercial sales effort.

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